Reliance Retail on a buying spree?

MNEW DELHI: Mukesh Ambani’s Reliance Retail has stepped on the gas and moving real fast on acquisitions. After bidding for Adani Retail in Gujarat, the company is now in advanced stages of talks for acquiring Maratha Stores, a Mumbai-based local co-operative store chain.

According to sources, what’s attracting the retail behemoth is the real estate that the relatively unknown retail chain possesses in India’s business capital. Maratha Stores has a chain of around 20 outlets in various catchment areas of Mumbai. In aggregate, the group has close to 75,000 sq ft of retail space, a large part of it in prime commercial markets. The chain operates in the neighbourhood 500 sq ft format as well as the larger 7000 sq ft outlets.

When contacted by ET, a Reliance spokesperson declined to comment. However, sources close to the development said the company has already prepared its blue print. “While the company may use the 500 sqft shops to enter the corner store format, it could use the 7000 sq ft shops to open Reliance Fresh outlets,” a source said.

Talks with Maratha stores seem to be in sync with the company’s plans to have a presence in high street catchment areas. Earlier this year, Reliance Retail took over 18 Sahakar Bhandar stores in Mumbai on a long term lease.

According to experts, acquisition of existing retail units is extremely critical for the company because it plans to bank heavily on price game and operate in discount formats. Margin is the key factor in this business. The way commercial rentals have shot up in the various parts of the country, high rentals will dent retailer margins. “With such acquisitions, where the company either gets the ownership of the property, or possession of a long term lease on base prices of even 2002-03, it will be able to significantly cut costs, by as much as 40-50%,” said a Delhi-based consultant of commercial real estate.

This is particularly important for a player like Reliance which aims at having 1-million sqft of retail space by 2010. The company envisages creation of 1,500 supermarkets and 1,000 hypermarkets in phases in important towns across the country.

Source : Economic Times